A more recent development in the
process of cross-jurisdictional banking has been the emergence of treaties and
joint agreements allowing banks and their regulators to reach across borders to
conduct banking business without the need to necessarily establish an
independent, autonomous branch. In the
US, the advent of interstate banking has broken down many of those historic
barriers. The emergence of the European
Union has also provided a model for the agreed rules that allow these
cross-jurisdictional banking operations.
The different structures in the banking and financial services industry
in the member states of the EU, together with their different regulatory
regimes, has created a substantial impairment to the cross-border provision of
services by financial institutions of one member state in other member
states. The Second Banking Co-ordination
Directive no. 89/646/EEC of 15 December 1989 is intended to remove such
barriers to entry by providing a "passport" to banking
activities. Subject to certain
requirements, if a credit institution is authorized to carry on banking
activities in its home state, then such institution should be allowed to carry on
the same activities throughout the EU. The Directive is based on the idea of a
single banking license, valid in all EU member states. Credit institutions
wishing to establish a branch or to provide services in a member state other
than their home state will no longer be required to obtain a separate authorization
form the host state. All EU member states are supposed to have implemented the
Directive by 1 January 1993.
Directive 97/5/EC of the European
Parliament and Council, dated January 27, 1997, regulated the cross-border
transfers of funds among Member States of the European Union. Member States
were required to implement these regulations by adopting them into their
respective national law.
In view of the significant increase
in the amount and value of cross-border payments made through bank transfers,
the Directive, and the corresponding new laws in each Member State, aimed to
create a legal framework so that both individuals and businesses can carry out
their transfers inside the European Union quickly, economically, and in a
reliable manner. The provisions of the
Directive are only applicable to transfers made in Euros or any other currency
of the Member States of the EU, but they do not apply to transfers in other
currencies (such as US Dollars, Japanese Yens or Swiss Francs).
The Directive only applies to
transfers for maximum amounts of 50,000 Euros, which equals roughly
US$52,000. This limitation carries
forward the Directive’s objective of facilitating cross-border transfers
particularly to individuals and small and medium enterprises. Due to its
consumer protection basis, the provisions of the Directive will not be
applicable where the transfer has been initiated by a credit entity, financial
entity, or any other entity that carries out cross-border transfers within the
frame of its business.
The Directive further applies only
to cross-border transfers among Member States of the EU and carried out inside
the EU itself, i.e., all those transaction initiated by an applicant through an
entity of a Member State and aimed at putting a certain amount of money at the
disposal of a beneficiary with an entity located in another Member State. Consequently, transfers made inside the
territory on the same Member State are not subject to the Directive.
The Directive sets out certain
minimum requirements on information that the entities must deliver to their
actual and potential customers as regards the conditions of the described
transactions. Before carrying out or receiving a cross-border transfer, the
entity must have notified the client of the period of time until the funds are
credited (or debited, as the case may be) in the beneficiary’s account, the
calculation methods for all costs and commissions payable by the customer, the
value date applied by the entity, means available to the customer to file
claims, and the exchange rates used. Such information must be presented in a
manner that is easily comprehensible to the client.
According to the Directive, after
making or receiving a cross-border transfer, the entity shall furnished
detailed information on the transaction which must include, at least, a
reference that allows the customer to identify the transfer, the initial sum,
the amount of costs and expenses at the customer’s charge, the value date
applied and, if necessary, the exchange rate used. Unlike the information
described in the previous paragraph, the customer may waive receiving such
information, although due to its importance such waiver should occur rarely in
practice.
The Directive requires the entity to
carry out the cross-border transfer within the time period agreed with the
applicant. If there is no express agreement, the applicant’s entity must carry
out the transfer such that the funds are credited to the account of the
beneficiary’s entity on the fifth banking day following the date of acceptance
of the transfer order. If this term is not complied with, then the applicant’s
entity must indemnify the beneficiary by paying an interest on the delay. If
the delay is attributable to an intermediary entity, then this entity will have
to indemnify the applicant’s entity.
In a similar manner, the
beneficiary’s entity must put the funds at the disposal of the beneficiary
within the agreed period of time or, absent an agreement, at the end of the
banking day which follows the date on which the funds have been credited to the
account of the beneficiary’s entity. Non-compliance with this term also
originates an indemnification obligation of the beneficiary’s entity.
In principle, and unless otherwise
instructed by the applicant, the costs related with the cross-border transfer
are to be borne by the applicant. Therefore, all intervening entities are
obliged to execute the transfer for its total amount. Where the applicant’s
entity has made an unauthorized deduction on the amount of the transfer, such
entity must, at its cost, transfer to the beneficiary the amount deducted or
pay such sum to the applicant. Similar obligations are established in the event
that the deduction has been made by an intermediary entity or by the beneficiary’s
entity.
